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Mk 4010- Metrics Homework

Mk 4010- Metrics Homework - All group members contributed...

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All group members contributed satisfactorily. 1. a. 10% increase in the price would drop the qu. demanded by 3% b. TR=50*10,000= \$500,000 TC= 10,000*15= \$150,000 c. P2=\$55 Q2= 10,000*.97= 9,700 units CM2=55-35=\$20 unit TR= 55* 9,700 = \$ 533,500 TR 20*9,700 =\$194,000 total contribution margin I would definitely recommend the price increase since the company is in the inelastic portion of the demand curve. The company’s price effect is greater than its quantity effect as it moves the price up in this portion of the demand curve resulting in a \$44,000 increase in contribution margin. d. – (5) / 15+ 5= -5/ 20= -.25 e. For the 10% price increase, quantity demanded cannot decrease by more than 25%. Alternatively, given the \$5 price increase, maximum amount quantity demanded can decrease by and this company make the same amount of contribution margin would be 25%. f. both metrics support the price increase because I do not think that increasing the price by \$5 will drop the quantity demanded by more than a quarter of the original , and the first metric says it will make them more margin.

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